Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for...
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Accounting
Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Splish Company, which started operations on January 1, 2016. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2017. The FIFO income statement is computed in accordance with the requirements of GAAP. Splishs profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored.
If comparative income statements are prepared, what net income should Splish report in 2016 and 2017?
Net Income 2017
Net Income 2016
LIFO BASIS
LIFO BASIS
FIFO BASIS
FIFO BASIS
2017
2016
2017
2016
SALES
$3,010
$3,010
$3,010
$3,010
COST OF GOODS
$1,190
$1,040
$1,050
$930
OPERATING EXPENSES
$1,050
$1,050
$1,050
$1,050
Income before profit sharing
$770
$920
$910
$1,030
Profit sharing Expense
$77
$92
$102
$92
Net Income
693
828
808
938
Answer & Explanation
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